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DIVISION OF ASSETS

California is a no-fault state. No-fault means that any bad conduct by a spouse is not a factor in the legal mandate that all assets acquired during the marriage (community property) are divided equally. Separate property is any property either acquired prior to the marriage, given to you by bequest inheritance, or gifted to you. Separate property does not need to be divided equally.

Division of property can be complex and require litigation. For example, the client who I spoke with today told me she wanted her divorce to be amicable. They had been separated for three years. They were running a successful construction business together and had numerous properties. She did not want anything to get in the way of their amicable relationship. Her husband insisted that she did not get a divorce because they were going to divide everything 50/50.

I asked her what her idea of a 50/50 division of the business was and what were her objectives. She did not know. I asked her whether she wanted to continue to operate the business with her husband. She told me she did not. I asked her if she expected her husband to want to buy that business from her. She said, “Well, I'm not sure. He might want to quit it, too.”

He runs the construction projects; she is the accounting person in the business. I said, “Assume he wants to buy the business from you because he can replace you pretty easily, an accountant. Not that you're not great at what you do, but you can hire an accountant.” He is the one that does the actual project managements and hires all the construction people. If there were to be a fight, the court would award the business to him anyway. The question is she going to agree that he can quit if he wants to? Because California law states, you cannot quit working until you are 65, if you have a spousal support obligation.

She had been married all these years. She told me she do not want to work in that business anymore. Even though they agreed there should be a 50/50 split, there are still unanswered questions: 1) What is the value of the business? 2) What if he does want to quit? Is she going to say no?

Then I asked her about the family residence. I asked whether they agreed who is going to keep the residence or if they agreed that it is going to be sold and divided equally. She said, “Well, no. We have not talked about that.”

People think that because you are willing to do a 50/50 division—which is what the law requires—there will be no dispute or litigation. If you really want an amicable divorce, you should be coming to me with what your wish list is. I will put together a value of the assets and present that to you and ask whether there are any disputes. First, you must agree who is going to keep the assets. Then we will agree on how we are going to value them amicably. It is best to retain one expert to do the valuation versus each getting your own expert who will then need a trial judge to resolve any disputes.

Many people want to have an amicable divorce, because they want to reduce the costs and save the personal relationships. Nobody is happy after a trial because it can be very expensive.

My office just finished a 10-day trial two weeks ago. We worked around the clock and must have billed 12, 15 hours each day and every weekend. We had a judge that had never done a family law case before. There was a business and real property. Even when you think you want an amicable divorce at 50/50, it is not easy.

What does a 50/50 division of assets mean? California law says a 50/50 division of assets is a mandate. But the law states that 50/50 could be one of three things. First, it could mean you divide the asset in kind. You say we are going to split the shares of the corporation. We are going to each own 50% of the operation and we are going to continue to operate the business.

Secondly, it could mean you value the asset. You have two houses; you value each one. You assign one house to each party and you equalize. Third, it could mean you sell everything. An equal division can be many things.

For example, the person who worked for a pension may want to keep the pension, even though California law says that it is community property—it's half hers and half his. Pensions are hard to value, so California law gives the judge maximum discretion assign the pension. The court does not say just because he earned it, he gets to pay her what the value is. 50/50 does not have mean the husband gets pension just because he was the participant employee. Many times, the wife does not want to be bought out of the pension at some actuarial calculation. Pensions are a complication of the equal division mandate. It is critical to people, because they earned that pension and they want to keep that pension.

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